Relational Said to Nominate Two B/E Board Directors

By Beth Jinks and Julie Johnsson -
Jun 4, 2014

Relational Investors LLC, the
activist fund co-founded by Ralph Whitworth and David Batchelder, nominated two directors at B/E Aerospace Inc. (BEAV) before
the aviation supplier postponed its annual meeting amid a
strategic review, two people familiar with the matter said.

Relational, which disclosed a B/E Aerospace stake of about
3.5 percent May 15, submitted Batchelder and Managing Director
Matthew Hepler as candidates before this week’s deadline, said
the people, who asked not to be identified because the
nominations aren’t yet public.

B/E said yesterday it is delaying the shareholder event
planned for July 24 while weighing options that may include
divesting some assets. The six-member board has two directors up
for re-election, including Robert Khoury, who is a co-founder
and the brother of Chairman and Co-Chief Executive Officer Amin
Khoury.

“As announced on May 4, 2014, the company is exploring
strategic alternatives which could include, amongst others, a
possible spinoff or other separation of selected businesses
within the company, a merger, or other strategic transactions
involving the company or its businesses,” B/E said.

B/E said it will schedule a new annual meeting and file
amended proxy materials “once a final determination has been
made.”

B/E Response

Greg Powell, vice president for investor relations at
Wellington, Florida-based B/E, couldn’t be reached for comment
about the nominations by San Diego-based Relational, which
manages about $6 billion.

“B/E Aerospace has great core assets and a strong
competitive position,” Relational’sHepler said May 15 in an e-mailed statement. “We welcome the company’s announcement to
explore strategic alternatives and will encourage the board to
evaluate and pursue opportunities, in a disciplined manner, that
will maximize value for all shareholders.”

Citigroup Inc. and Shearman & Sterling LLP are helping B/E
explore alternatives as part of the review, which surprised some
investors after the company said in April that it was working on
two acquisitions. B/E said June 2 it was purchasing aerospace
suppliers Emteq Inc. and F+E Fischer + Entwicklungen GmbH for
about $470 million.

B/E, known for making aircraft seats, also supplies
aircraft beverage makers, galley chillers, oxygen and lighting
systems and aerospace fasteners. It also has made a foray into
the oil and gas equipment-distribution business.

Duties Split

Amin Khoury, 75, co-founded the company with his brother in
1987. As co-CEO, Amin Khoury has been splitting his executive
duties with operations chief Werner Lieberherr since the start
of the year.

An outright sale of B/E doesn’t appear to be among the
most-likely outcomes of the company’s review, two Oppenheimer &
Co. analysts wrote yesterday in a note to clients.

In contrast to the May 4 announcement, yesterday’s release
no longer includes “an explicit reference to the potential
‘sale’ of the company as a whole” as one of the options under
review, Oppenheimer’s Yair Reiner and William Lee wrote.

Together with the company’s two acquisitions, “the latest
release appears consistent with the potential separation” of
the consumables unit that includes B/E’s oil and gas purchases
and retention of the commercial-aircraft and business-jet
divisions, wrote Reiner and Lee, who are based in New York.

Aviation Sales

B/E’s aviation sales have grown as planemakers Boeing Co.
and Airbus Group NV (AIR) compiled a record backlog of more than
10,000 orders, according to data compiled by Bloomberg
Industries. Revenue at the commercial-aircraft and business-jet
operations reached $2.2 billion in 2013, out of $3.48 billion
companywide.

Relational’s holdings include stakes in energy group Hess
Corp., agricultural commodity processor Bunge Ltd., snacks
supplier Mondelez International Inc., X-ray machine maker
Hologic Inc. and air-conditioning manufacturer Ingersoll-Rand
Plc, according to its most recent holdings disclosures. Third
Point LLC, the hedge fund run by Daniel Loeb, exited its B/E
holdings in the first quarter, according to a May regulatory
filing.

For the past year, Whitworth has served as interim chairman
of Hewlett-Packard Co. (HPQ) after urging changes to turn around the
largest personal-computer maker.

Activist investors tend to buy at least 5 percent of a
company’s stock and flag their intention to actively engage
executives and directors by disclosing their holding in a 13D
filing with the U.S. Securities and Exchange Commission.